A supplement to STORES Magazine January 2018, Section 2 Global Powers of Retailing 2018 Transformative change, reinvigorated commerce Where learning happens The retail workforce is changing D2L’s learning experience platform helps prepare and engage your transforming workforce. It provides a personalized learning experience, leadership development, and peer-to-peer knowledge sharing by leveraging content creation and curation, video, and social assessment. Find out how at D2L.com/retail Drop by booth #1136 The D2L family of companies includes D2L Corporation, D2L Ltd, D2L Australia Pty Ltd, D2L Europe Ltd, D2L Asia Pte Ltd, and D2L Brasil Soluções de Tecnologia para Educação Ltda. All D2L marks are trademarks of D2L Corporation. Please visit D2L.com/trademarks for a list of D2L marks. Global Powers of Retailing 2018 | STORES/January 2018 Contents Retail trends: Transformative change, reinvigorated commerce G4 Global economic outlook G7 Top 10 highlights G10 Global Powers of Retailing Top 250 G12 Geographic analysis G19 Product sector analysis G22 New entrants G25 Fastest 50 G26 Study methodology and data sources G30 Endnotes G32 Acknowledgments G35 G3 Global Powers of Retailing 2018 | STORES/January 2018 Retail trends: Transformative change, reinvigorated commerce It’s a transformative time in retail. The shopper is clearly in Building top-notch digital capabilities the driver’s seat, enabled by technology to remain constantly Retailers across the globe are rapidly adapting to the connected and more empowered than ever before to drive fact that, from the consumer perspective, shopping changes in shopping behavior. “Everywhere commerce” has is not about bricks versus clicks or one channel taken root, allowing consumers to shop however, wherever, and versus another. Instead, consumers are channel-agnostic. The whenever they want—whether in stores, online, by mobile, voice shopping journey and pre-shopping research is a fluid process activation or click-and-collect. with consumers bouncing between online and offline along the path to purchase. Across the retail industry, disruption of traditional business models has given way to unprecedented and transformative Just how much digital influences consumer spending is a real eye- change—change required online and offline to better serve opener. In the 2016 report The New Digital Divide, Deloitte found more demanding shoppers. Innovations and transformations that digital interactions influence 56 cents of every dollar spent are happening faster and at a greater magnitude than ever, in bricks-and-mortar stores,2 up from 36 cents just three years presenting challenges for retailers accustomed to balancing prior. 3 Furthermore, people who shop using different methods— conventional performance metrics like growth, profitability, and including online, mobile and visits to a physical store—spend space productivity. more than double those who only shop at bricks-and-mortar stores, according to Deloitte’s The Omnichannel Opportunity The standards are shifting, however, as some of the world’s study.4 nimblest and fastest-growing retailers—recognized industry disruptors like Amazon and JD.com—actively forego short-term This means retailers must adequately and holistically plan, profitability in their quest instead for customer acquisition, top- strategize, and execute across all channels, regardless of whether line expansion, and retail dominance. Established and entrenched the ultimate sale happens in-store or online. A seamless shopping retailers could be at risk of losing customers and market share to experience is no longer a nice to have, but an imperative. And these retail disruptors who are able to exploit organizational and it’s a key reason why retailers worldwide are heavily investing in operational agility. online and digital. In the past year, retail bankruptcies have been all too common. More than ever, the retail industry is rife with examples of Stores are closing as retail spending moves online at a meteoric companies building, buying, or partnering to attain much-needed pace, gets overturned by spending on services, and some e-commerce and last-mile capabilities. Most notably is Amazon’s retailers generally lose favor with consumers. In fact, the US rapid ascent up the Top 250 ranking from its debut at No. 186 in saw a record number of store closings in 2017, with 6,885 stores 2000 to No. 6 in this year’s report. The retail giant is bigger and already having shut their doors by 1 December.1 Among those more powerful than ever. It continues to enter new markets, rationalizing their store bases are Macy’s, J.C.Penney, Sears/Kmart expand product categories, and test new technologies and and a host of mall-based apparel specialists. Stores across the concepts, leaving a path of disruption and destruction in its wake. globe face a similar fate as retailers close unprofitable stores to instead focus on their most productive and promising locations. The rules of retailing indeed are being rewritten in this time of transformative change. Innovation, collaboration, consolidation, integration, and automation will be required to reinvigorate commerce, profoundly impacting the way retailers do business now, and in the future. G4 Global Powers of Retailing 2018 | STORES/January 2018 In what could be one of its biggest moves to date, Amazon gained which Auchan is a leading shareholder. French supermarket chain an instant bricks-and-mortar presence when it bought natural Casino has inked a deal with online retailer Ocado to leverage the supermarket Whole Foods Market last August. The deal gives latter’s technology platform to launch an e-commerce business Amazon access to more than 450 physical pickup points and fresh in France. In Spain, DIA is partnering with online discount retailer food “distribution centers” located throughout the US. The retailer MeQuedoUno to expand its e-commerce offer in electronics and also is preparing its internally developed checkout-free Amazon Go other household goods. convenience concept for prime time. A single store has been in test mode by company associates since early 2017. Meanwhile, since the Amazon/Whole Foods combination was announced, it seems not a day goes by in the US without another Combining bricks and clicks makes up for supermarket player aligning with third-party provider Instacart lost time on grocery home delivery. Instacart’s increasingly lengthy and impressive list of retail partners includes Kroger, Price Chopper, The rest of the retailing world is not about to sit idly Publix, Stop & Shop, Wegmans, and even hard discounter by and watch Amazon shoot up the retail ranks and Aldi. Instacart recently crossed north of the border, forging an steal market share. Many players that may have initially been on the e-commerce alliance with Canadian’s top grocer Loblaw. sidelines, failing to keep up with digital trends, are now making up for lost time in a big way. Interestingly, Amazon has been busy designing some partnerships of its own to try and solve the last-mile delivery conundrum. The A recent study finds that global grocery sales through e-commerce retail giant broadened its collaboration with UK grocer Morrison’s channels jumped 30 percent in the past year.5 Countries leading to bring one-hour grocery delivery to London-area shoppers. In the growth charge were China (+52%), South Korea (+41%), the the US, Amazon is pairing with several shoppable recipe sites, UK (+8%), France (+7%), and Japan and the US (both +5%). China is including Allrecipes, EatLove, and Serious Eats, to add buying and the world’s dominant e-commerce—and mobile—market.6 Two delivery services, typically through its Prime Now offer. The e-tailer of the top three fastest-growing retailers in 2016 are China-based also recently opened the “Amazon Smart Home Experience” inside e-commerce retailers Vipshop and JD.com. select Kohl’s department stores in Los Angeles and Chicago, including an area inside the store that accepts Amazon returns. The world’s largest retailer Walmart has made it clear that e-commerce is one of the company’s strategic pillars. Walmart is Creating unique and compelling in-store pumping billions in capital investment to introduce Grocery Online, experiences ramp up click-and-collect capabilities, and leverage its vast network of stores to marry online and offline assets and gain an edge over Physical retail stores are not going away; 90 percent of Amazon.7 The retail behemoth also has been on an acquisition worldwide retail sales are still done in physical stores.9 spree of late, buying the likes of Jet.com, ShoeBuy, Moosejaw, But to compete with the convenience and endless aisle assortment ModCloth, and Bonobos to quickly attain e-commerce capabilities offered online, meaningful customer experiences and brand in lieu of building from the ground up. engagement is crucial. Apple Stores and Nike Retail are held as the gold standard in this regard. Increasingly though, forging e-commerce partnerships, in which each party brings something unique to the table, is gaining traction. Other bricks-and-mortar retailers are realizing the importance of Walmart and JD.com formed a strategic alliance in June 2016, creating unique and curated merchandise offers, an exciting and positioning the world’s No. 1 retailer for growth in China. As part entertaining atmosphere, and concierge-like service levels beyond of the deal, Walmart sold its Yihaodian e-commerce business to what consumers can find online. What’s starting to happen inside JD.com and took a 5 percent stake in JD that has since grown to 10 grocery stores across the globe is a good example. percent.8 More recently, JD.com partnered with leading Thai retailer Central Group too, with plans to launch an online shopping site in Grocers are transitioning from providers of goods to purveyors of Thailand in 2018. services and solutions, with food, health, and wellness converging in a retail setting. A host of retailers already have added in- French grocer Auchan and Chinese e-commerce technology store health clinics and on-site nutritionists and dieticians.